Netflix Chief Ted Sarandos Uncensored: Why Blockbusters Are Doomed (Exclusive)

EmmyWrap magazine: Executive says “Beauty and the Beast” might be last billion-dollar movie ever in wide-ranging chat

A version of this cover story first appeared in The Race Begins issue of TheWrap Emmy Magazine.

In the space of a decade, Netflix has risen to monolithic status on the entertainment landscape. Once an upstart rent-by-mail house for DVDs (remember those?), the streaming service now produces more content than several Hollywood studios combined, boasting 1,000 hours of content this year alone.

The company shows no sign of slowing down, with a massive $6 billion production budget and a gleaming new headquarters in Hollywood, where 1,000 employees now come to work.

In his new office, Netflix Chief Content Officer Ted Sarandos talked about why he’s bringing production back to California and skipping the tax incentive game, why day-and-date movie releases are inevitable and whether it’s possible to produce too much content.

Location, Location

TheWrap: This is a pretty small office for a mogul — we would have thought this whole floor was yours
Ted Sarandos: 
It’s a collaborative space, and I try to be as accessible as possible. The main thing is we wanted a creative work environment for people. It’s not like a tech building with climbing walls and ping-pong tables. I want it to be fun but not playful. It’s a workplace.

You have 1,000 people working in Los Angeles. Give us some context: Three years ago, what was it?
When we contracted for this building we intended to move here with 500.

What changed?
Well, obviously our expansion of original programming production. We knew we were going to do that kind of expansion, but what the actual body count we would need for that was not that clear.

The content team particularly has been centrally located. Other parts of the business are more decentralized –marketing and PR are more likely to have physical presence in Singapore, Tokyo, Amsterdam. Right now we only have two people outside of the U.S. — outside of Los Angeles — on the content team.

Photo by Jason Kempin/Getty Images for ID-PR

Photo by Jason Kempin/Getty Images for ID-PR

California, Here We Come (Back)

You said that you intend to bring more production back to California. Can you talk about what that means concretely?
I think it’s smart when you invest in any kind of infrastructure that supports an industry. And this is a serious industry. We know the talent wants to work here. The below-the-line talent is also here, too, the best in the world. All the productions are getting lured away by the temporary benefit of a tax credit, but when we’re done with “House of Cards” in Baltimore, we’re gone. And the infrastructure is gone, too.

I’m happy to participate in the incentives if they work, but there is a cost to the creative of the show. “Veep” is a great example. When they moved from Baltimore to L.A., the show got way better. They have the best writers on television now. The show is funnier, everyone’s happier. I think it shows up on screen. Shooting in L.A. is an investment in the quality of the show.

How much of your production is here, and is there is a deliberate pace you’d liked to see in moving additional production to L.A.?
I don’t want to set up a metric because it’s so creatively driven. We shoot in Santa Clarita for “The Santa Clarita Diet,” and we have “The Ranch” at Warner Bros., “One Day at a Time” at Sony, “Disjointed” at Warner Bros., “Grace and Frankie” at Paramount. The series are spread all over town. We’re pretty much maxing out facilities, so it’s hard to get a stage.

So you’re limited in how much you can bring because of that?
Right now it’s really just a practical decision. We have nine shows in New York, and it’s also tough to get a stage there. That’s an example of how New York and L.A. have allowed themselves to fall behind other states. It’s creating a necessity to work outside of California and New York.

We just came from Georgia, where there’s a whole professional pool to dip into.
But Atlanta has issues too. They ran out of carpenters, so they actually fly carpenters in from New York to build sets. I’m not saying these aren’t good alternatives if people want to do that. I just think that nobody woke up and said, “I want to be in the movie business and I have to move to Atlanta.”

Size Matters

Is it correct to say that Netflix is now the single biggest producer of content?
It’s certainly on the path to be, if we are not now. The BBC might be up there. We do the most hours of original programming of any network. We don’t do sports or news, though. They do.

The ‘Bright’ Future

You’ll release Will Smith and David Ayer’s “Bright” on Christmas, the first big-budget film of this genre you’ve done. Will it get an extra tech polish and are you hoping for expanded theatrical?
We have minimal theatrical release, and no release ahead of us. If AMC and Regal would book the movies day-and-date, I’m not against it. My main thing is consumer satisfaction. If you really believe people would abandon movie theaters if day-and-date releasing was going on, that doesn’t say much for that industry. I have more faith in them then they do.

Yes, because you have a lot less to lose and everything to gain
It’s a 100 percent fair. What has been happening every decade since the beginning of television? Shrinking attendance and raising ticket prices.

That’s right. And now they are widening the chairs and making them go back. And that’s actually worked
One hundred percent. We did the deal with iPic because they’re doing just that. They created a differentiated experience. Seeing a movie at iPic is way different then seeing it on Netflix. Seeing it at the Cineplex in Century City is not much different. What I see is uncomfortable seats, people talking and texting, sticky floors and a screen that keeps getting smaller.

But IMAX, Dolby there are all kinds of big screens out there
Multiplexes are not necessarily the case. Depending on where you live, you may not have access to a screen like that.

It’s a big investment in those seats
Let’s say you have a great steakhouse, are they going to ban consumers from eating steak at home? Food is day-and-date. People still go to great restaurants.

Would you call it watchful waiting then? We look at someone like Amazon. who is promising aggressive marketing and 90 days exclusive theatrical
They may know something I don’t, but in the time of incredible movement … as a point of pride [saying] that you’ve extended windows? It doesn’t feel very consumer friendly at all.

I think that what you’ll find is that subscription is a better way to monetize most movies. Not all movies but most movies. So “Beauty and the Beast” may be the last billion-dollar movie ever. It’s possible.

Um, “Star Wars”?
It’s bigger than the last “Star Wars.” “Beauty and the Beast “is bigger than “Rogue One.”

Are you saying [“Episode VIII”] not going to be a billion dollar movie?
It may be. It might be. I’m just saying it’s going to be pretty rare.

Closing Windows

Recently at CinemaCon, everyone was saying, “We really need to deal with this question of windows.” And then, nothing
I’ve been an advocate for consumer choice. Netflix has been a champion of consumer choice. The windowing of theatrical movies is the only thing in the media that hasn’t been impacted by the internet. Do you think it’s going to stay like that? I don’t know. Denying people what they want is not good business. The reason why it’s such a heated debate is because they know that’s what consumers want.

My main thing is we’re all in the consumer-satisfaction business. If you really believe that people would abandon movie theaters if day-and-date releasing was going on, that doesn’t say much for that industry.

Too Much Content?

How do you quantify your original production versus your acquisitions in terms of percentage?
Um … I try not to. But it’s about one-third original production.

The aim is to have it be ..?
The aim is to have great content. We did a high-profile acquisition, “The People v. O.J. Simpson,” this year. On FX it’s doing great, people love it all over the world. We have the global second window. We’re trying to produce the things people want to see, because it’s a better model — the windows don’t get conflated and overlap, I don’t have to hold back for a year for our customers in Latin America who may want to see something now.

Is there any point where there is too much content?
When you had three networks, three hours of prime time, there was such a thing as too much TV. But now you have unlimited shelf space and bandwidth, and tastes are hugely differentiated from one another. It’s hard to get everyone in your house to agree on the same thing, let alone a whole country. So we can make shows that appeal to specific taste and specific genres that are not in conflict with one another at all.

So there’s no such thing as too much content?
One hundred percent correct. I believe there is no such thing. Everything is not for everyone. If everything was for everyone then yeah, I would agree. We’re programming for 93 million unique tastes, so I don’t think we are anywhere near too much programming.

Go here to read more of The Race Begins issue of TheWrap Emmy Magazine.

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